Profit from Procurement

1INTRODUCTION: Why Procurement, and Why Now?

What Follows Is a True Story

Many years ago, I was at a cocktail party hosted for expats in London, with my wife. Many of those present were from the big New York investment banks. At one point, I started chatting with one of these individuals.

“So, what do you do?” he asked.

“I'm a consultant.” I replied.

“Consulting in which field?” he asked.

“Procurement” I replied, at which point he looked at me with an expression of disgust and said, “Excuse me while my eyes glaze over,” then turned around to signal that the conversation was over.

Now, that's very rude behaviour, but that's not the point. The point is that Procurement has such a poor image that it's not even deemed worthy of a conversation by those who consider themselves to be at the top of the business food chain. Procurement is just not exciting, and it's certainly not sexy.

Well, how exciting does it have to be? How about having the potential of increasing your EBITDA by a third? How about having the resilience to keep your supply chain up and running during a global pandemic? Procurement is an enormous profitability lever, and it should be a core competence—especially in modern times, in which companies accomplish more and more through outsourced relationships.

Yet in the majority of companies, Procurement is far from optimized, and there is a massive prize to be had if we could only do a better job. Since Procurement represents between 50 and 80% of a company's costs ...